Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.

How To Choose A Cash Back Credit Card

Lee Huffman

Lee Huffman spent 18 years as a financial planner and corporate finance manager before quitting his corporate job to write full-time in 2018. He has been writing about early retirement, credit cards, travel, insurance and other personal finance topics since 2012. Lee enjoys showing people how to travel more, spend less and live better by taking control of their finances. When Lee is not getting his passport stamped around the world, he’s researching methods to earn more miles and points toward his next vacation.

His writing can be found on many popular travel and personal finance websites such as The Points Guy, U.S. News, Forbes and NerdWallet. You can follow Lee’s travels at BaldThoughts.com or listen to his weekly travel podcast at WeTravelThere.com.

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Ashley Parks

Ashley is an associate editor at Newsweek, with expertise in consumer lending. She is passionate about producing the most accessible personal finance content for all readers. Prior to Newsweek, Ashley spent almost three years at Bankrate as an editor covering credit cards, specializing in transactional content along with subprime and student credit.

To learn more about Ashley and her work, you can visit her personal website at ashleyparks.com.

Read Ashley Parks's full bio

Man holding credit cards and he use credit card to pay and spend Payment for goods via credit card. Finance and banking concept.

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Cash back credit cards typically earn a flat percentage on every purchase or have elevated rewards on specific spending categories. Here’s how to choose a cash back credit card to get the most value from your everyday purchases.

Our Methodology

Understanding the value of cash back is simple, but valuing airline miles or points redeemable for travel requires digging a bit deeper. At Newsweek, we’ve developed a common language to talk about the value of points and miles: our valuations.

Our valuations translate points into dollars and cents in a way that reflects reality. They are based on actual data across a balance of accessible redemption options, not just the aspirational first and business class redemptions that require a PhD in miles and points to book. The upshot is that our valuations help you understand the actual value you can easily get from your miles and points.

Vault’s Viewpoint

Cash back rewards have the most flexible redemption options, including using the cash to save, invest or pay down debt.
Cards typically offer a flat rate of rewards or higher earnings on select categories.
You can maximize rewards by choosing a card with bonus categories that align with your biggest expenses.

What Is a Cash Back Credit Card?

A cash back credit card is a type of rewards card that earns cash based on your purchases. The cash back you earn is a percentage of your spending. Some cash back credit cards earn a flat rate on all purchases, while others offer a higher rate on eligible purchases and a lower rate on everything else.

You can typically redeem cash back rewards for statement credits to reduce your account balance, direct deposits to a linked bank account or a check mailed to your address. Other redemption options may include booking travel, buying gift cards, online shopping and more. In some instances, cardholders can transfer rewards to airline and hotel partners or combine points with other cards that have that option.

What Types of Cash Back Rewards Can You Earn?

While cash back cards often have similar features, you’ll have several different ways that you can earn cash on your purchases. Here are five ways to earn cash back on your credit card.

Welcome Bonus

Many credit cards offer a welcome bonus to attract new customers. To earn the welcome bonus, you typically must spend a certain amount within a short timeframe. The actual dollar amounts and timing vary by credit card and bank, and some cash back credit cards don’t offer a bonus at all. When comparing cards consider your financial situation and spending habits. You want to be able to meet the minimum spending requirement without going into debt or overspending.

Flat Rate of Rewards

Cash back credit cards may offer a flat earnings rate on every purchase. For example, the Citi Double Cash® Card earns an unlimited 2% cash back—1% when making purchases and 1% as you pay down your balance. This flat rate of rewards eliminates the guesswork of how much you’re earning and where you earn it.

Fixed Bonus Categories

Many rewards credit cards have a fixed set of bonus categories that offer higher rewards, like the Capital One SavorOne Cash Rewards Credit Card, which offers unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores. These categories remain constant throughout the year, and they’re ideal for consumers who know where they spend the most.

Rotating Bonus Categories

Some credit cards have rotating bonus categories, which allow cardholders to earn higher rewards on their spending throughout the year. The Discover it® Cash Back and Chase Freedom Flex℠ have quarterly rotating bonus categories you must activate to earn maximum cash back. Other cards, like the Citi Custom Cash® Card, automatically apply the highest rate to the eligible category where you spend the most. In most cases, the highest cash back rates are limited by spending caps per month or quarter, depending upon the card.

Limited-Time Promotions

Credit cards may offer additional cash back opportunities for a limited time. These events often happen when you first open a credit card and elevated cash back is available on a selected category for a limited time.

Other cards include bonus cash back for a limited time for all cardholders. With the Capital One SavorOne Student Cash Rewards Credit Card, you’ll receive 10% on Uber and Uber Eats orders through November 14, 2024. Taking advantage of these opportunities that may be offered for a limited time can significantly boost your cash back rewards.

How to Choose a Cash Back Credit Card

Cash back credit cards offer valuable rewards you can use any way that you like; However, when choosing a cash back credit card, you need to be aware of certain pitfalls that can impact your plans.

Annual Fees

Many competitive cash back credit cards don’t charge annual fees. This factor allows you to keep all of your cash back to spend as you wish. However, some cards do charge a fee, like the Capital One Savor Cash Rewards Credit Card and the Capital One QuicksilverOne Cash Rewards Credit Card, that can cut into your earnings.

Depending on your spending habits, the rewards may be worth the annual cost. However, Capital One Savor Cash cardholders must spend around $800 per month on dining, entertainment, popular streaming services and at grocery stores to justify paying its fee over the no-annual-fee version of the card by our math.

Spending Limits on Bonus Categories

Some credit card bonus categories offer lucrative earning rates of up to 5% or 6%. However, the spending for these promotions is typically limited on a monthly, quarterly or annual basis. The Blue Cash Preferred® Card from American Express earns 6% cash back on up to $6,000 spent in purchases at U.S. supermarkets each year (then 1% cash back). That cap breaks down to an average of $500 per month, which is about half of what the average American household spends on groceries.

Carrying Balances and Paying Interest

Earning cash back rewards is a great way to improve your finances, but not if you carry a balance. When you don’t pay off your credit card in full each month, the bank charges interest on your debt. These interest charges are typically more than the amount of cash back rewards you can earn, so it is not worth earning cash back if you can’t pay off your spending each month.

How to Maximize the Value from a Cash Back Credit Card

Whether you’re paying an annual fee or not, you should take advantage of all of your card’s benefits and earning power to get the most value from it.

Take Advantage of Bonus Categories

If your cash back credit card has bonus categories, make sure you match your spending to your highest earning categories. If you have a card with bonus categories on a specific type of purchase, try funneling all of those purchases to that particular card. Doing so can help ensure you’re getting the most value out of that spending category.

Avoid Interest with Intro APR Offers

When you sign up for a new credit card, the issuer may have an intro APR offer that includes a reduced interest rate or 0% APR promotion. Intro APR offers on purchases and balance transfers save you money on interest charges by hitting pause on interest for the designated intro period. Just know that once this intro period ends, you’ll have to pay the card’s ongoing interest rate on whatever balance you have left.

Transfer Rewards to Partners

If you have an eligible card, you may be able to transfer rewards to airline and hotel partners. Booking award travel with miles and points can offer higher value than what you’d receive through cash back. For example, the Citi Rewards+® Card transfers to select ThankYou Points partners.

Use Purchase Protections

Credit cards that include purchase protections offer significant value for consumers. Four primary purchase protections are available—purchase, return, price and extended warranty.

Purchase protection protects you against theft, damage or loss. Return protection reimburses you when a retailer won’t accept an eligible return. Price protection pays you the difference when the price of your item drops within the covered period. Extended warranty coverage offers up to an extra year to the manufacturer’s warranty on eligible items.

Leverage Travel Benefits to Protect Your Trips

Travel benefits provide peace of mind when traveling domestically or abroad. Your card may offer numerous types of complimentary protections. Examples include trip delay, baggage protection, rental car insurance and trip interruption/cancellation. If your card has one or more of these benefits, you’ll automatically be covered when using your card to book the trip.

Should You Have More than One Cash Back Credit Card?

For consumers who want to maximize rewards, having two or more cash back credit cards is an excellent choice. Multiple cash back credit cards allow you to take advantage of bonus categories in the areas you spend the most while having a flat rate card to earn elevated rewards on everything else. This strategy maximizes rewards, but it can be risky if you aren’t in control of your finances or don’t have a reliable tracking system for monthly payments.

Frequently Asked Questions

Is There a Downside to Cash Back Credit Cards?

A major downside to cash back credit cards is that you cannot redeem rewards for outsized value like you can with airline miles or hotel points. Additionally, some cash back credit cards have a cap on how much you can earn with their largest bonus categories. These caps can severely limit the value of the card and make it difficult to offset the annual fee, if it charges one.

What Is a Good Cash Back Percentage?

The best cash back credit cards offer rewards up to 5% or 6% on select categories. These rewards are extremely generous, but typically have a maximum amount of spending that qualifies for these elevated rates. Earning a flat rate of 2% cash back on everyday purchases is another excellent option for consumers too busy to focus on specific spending categories.

Are Cash Back Cards Worth It?

Yes, cash back credit cards are worthwhile for consumers who want to earn rewards, but don’t want to be limited on how they can spend them. While you can receive excellent value when redeeming travel rewards, typically you can only redeem miles and points with the airline and hotel sponsoring those cards. With cash back, you can spend the money however you like, including investing, paying off debt or building an emergency fund.

Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.